EUR/USD Slips Toward 1.1600 as Traders Eye US-EU Trade Deadline and Fed Policy Signals

The euro is under modest pressure at the start of the week, with EUR/USD slipping to around 1.1620 in early Monday trading. After gaining ground in the previous session, the pair is facing headwinds as traders adopt a cautious stance ahead of the August 1 U.S. tariff deadline and ongoing U.S.-EU trade negotiations.

The U.S. dollar remains steady, supported by safe-haven flows, as market participants await clarity on potential trade agreements. The cautious tone stems from fears that the U.S. may implement steep new tariffs on dozens of countries, including key European exports.

Commerce Secretary Howard Lutnick expressed optimism over a breakthrough, telling CBS News that he expects the coming weeks to be “ones for the record books,” and voiced confidence in securing a U.S.-EU trade deal before the deadline. He added that there is still “plenty of room” for compromise and described ongoing discussions with European negotiators as constructive.

“These are the two largest trading partners in the world in talks. We’ll get a deal done. I’m confident of that,” said Lutnick.

Despite today’s dip, EUR/USD downside may remain limited, thanks to the increasingly dovish tone surrounding the Federal Reserve’s rate outlook.

Fed commentary last week tilted toward easing:

• San Francisco Fed President Mary Daly said two rate cuts this year remain a “reasonable” base case.
• Fed Governor Christopher Waller highlighted softness in the private sector labor market and said the Fed should begin cutting rates as early as July, warning that delaying action could require more aggressive measures later.

With markets already pricing in Fed rate cuts by September, the USD may face renewed pressure in the sessions ahead — potentially offering the euro some short-term support if a trade deal materializes or risk sentiment improves.

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